Kwasi Kwarteng Usa Britain UPS COST Action Kwasi Kwarteng Usa Britain

Interest rate hike points to the Bank keeping its foot firmly on the brake

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Despite believing that Britain is already in the early stages of a recession, the Bank of England voted to raise interest rates by 0.5 percentage points at the latest meeting of its monetary policy committee.That’s the first unusual aspect of the latest pronouncement from Threadneedle Street.

In the past, a slowing economy – let alone one already going backwards – would be the signal for lower borrowing costs.Yet the Bank is stepping up its action.

The MPC has now tightened policy at seven meetings in a row, and having been content with quarter-point increases earlier this year has now plumped for back-to-back half-point jumps.It is also clear the committee thinks rates will need to go still higher in the coming months.

The Bank is assuming the chancellor Kwasi Kwarteng’s mini-budget on Friday will add to inflationary pressure and will make a “full assessment” of its implications before the next meeting of the MPC in November.There was nothing in the minutes to suggest the MPC was ready to pause its tightening cycle. “The labour market is tight and domestic cost and price pressures remain elevated,” it said.Three members – Catherine Mann, Jonathan Haskell and Dave Ramsden – wanted the Bank to join the US Federal Reserve in raising rates by 0.75 points.

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